DOING BUSINESS IN AFRICA: REAL ESTATE
A few years back, we began hearing experts on media networks praising the bright future of Africa as the next fast-growing market and big player of the Global Economy. Today, their roar is ever louder. On paper, the numbers seem also very promising and all major international organizations like the IMF, the World Bank and the WTO already predict the advent of its new role in the coming century, if enabled by colossal modernization projects. In the meantime, it will remain an adventurous road for daring entrepreneurs.
The question we ask is: depending on the sector you evolve in, what are the hurdles you might cross on your path? Our answer below:
You have projects in sustainable agriculture, develop interesting real estate projects or simply wish to build your future villa under the sun? Africa could be your new Eden as much as the process could be challenging. One of your first challenges will happen when you’ll have to go through the process of acquiring a land.
If, by chance, the country you targeted actually has an accurate land registry system with your land figuring on it, you might be able to obtain accurate maps from relevant public authorities and constitute your file, but might have a harder time identifying its actual ownership status.
As it is often the case, transactions might have happened on the same land prior to your initiative. To identify the real owner of the land, always ask for an Ownership Rights History extract to the corresponding authority in the country.
In some cases, identifying the actual owner within a family can also prove insufficient, since negotiations should also be held with the authority figure of the family (the elder). In a nutshell: identify and talk to the decision maker, or you might end up negotiating with the wrong person and potentially find yourself in the middle of a family crisis, wasting time that could have been spent on blissfully watching your greens grow.
After having managed a written agreement with the owner, your transaction has still to be validated by the local rural authority, a modern version of the village elders. They will examine your request depending on the kind of project you propose, the valuation that was given, your personality and its potential for economic downfall on their daily lives. Be open-minded and try to build a positive relation with them: they might become your local recourse if you encounter a problem or even help you finding local human ressources.
If validated, what you will most probably obtain is an “emphyteutic lease” for a 99 years period, revocable at any moment by the State. If you wish for more security, you’d be better off converting this lease in an actual land title, with full ownership and rights. It will however usually cost you a certain percentage of the land value in Transfer Rights.
You are now the proud owner of a land in Africa! One last thing though… If your project has commercial purposes, try to hire local or even better: try to hire the family of the previous owner. You will participate further in the local economy and people will be grateful for allowing them to maintain their ties with their ancestral land.
More than anywhere else, your success in Africa will depend on your personal wit and care for others. Be human, be yourself, build long lasting relations and friendship, and you will enable a positive and virtuous environment that will facilitate your daily life or, at least, lower all those “hidden costs” you will have to pay for along the way if you remain a stranger ; )
(This article is the first part of a series on a sectorial analysis of “Doing business in Africa”)
Check out our last post on How to do business in the Gulf Countries